Obi-Wan Kenobi
/ 178.36.49.* / 2010-04-06 10:13
Front page headline on Friday’s Wall Street Journal proclaimed a big up-tick worldwide in the manufacturing sector.
According to the paper, everybody is making more and more stuff. This helps assure that the recovery “has legs.”
Auto sales, too, came in stronger than expected in March. So it sounds like the recovery has wheels too.
What we want to know: does it have a brain? Who’s buying this stuff and where are they getting the money?
At least the economic model of the bubble era made sense. The producers produced. The consumers consumed. That worked great until the consumers ran out of money. Then, they had to borrow from the producers. And eventually, the whole thing blew up when it became clear that the spenders had borrowed and spent too much, while the producers had expanded and produced too much.
So far, so good. But now, the world economy needs a new model, right?
The consumers can’t really go back to borrowing, can they? Nope. Not without digging themselves deeper in the hole…or actually earning more money. So, the producers can’t exactly go back to producing either, can they? Nope. Not without customers.
Well, who the heck are all these manufacturers making stuff for?
Darned if we know. In theory, there are billions of ready consumers in Asia and Africa. Except they don’t have much money. And don’t have much credit. And don’t have shopping malls. And don’t have any way to get to the malls if they existed.
In India, for example, half the population lives on less than $3 per day.